State Capture and corruption

29 May 2017

Introduction

Much attention has been paid recently in the public debate to reports of corruption in the South African Government and state-owned enterprises and to the so-called phenomenon of “state capture”. A new phase in the public debate has, in particular, been fueled by a report of the South African Council of Churches, by hearings of the Parliamentary Committee on Public Enterprises and by the publication of a study by the State Capacity Research Project. Each of these events is dealt with below, together with an analysis of their content and impact on the national debate on corruption and state capture.

The SACC report

The South African Council of Churches announced the findings of its “Unburdening Panel Process” on 18 May 2017. It had created this process in April 2016, describing it as a safe space and a “facility” offered by the churches to persons who wish to relieve themselves of a burden, caused by the experience of being pressured to perform a corrupt act or where they had witnessed such an act. The SACC emphasized that this was intended as a pastoral process for the people involved, and not as an investigation. It stated that it had created this “listening facility” as a result of the ANC’s unwillingness to deal with recent revelations on the subject of state corruption. In its statement introducing the report on 18 May 2017, the SACC said that 

Today we are therefore seized with Anchoring Democracy, as we have come to recognize that South Africa may just be a few inches from the throes of a Mafia State, from which there may be no return – a recipe for a Failed State….

It now seems that the problem is far greater than corruption, but organized chaos. We have now come to learn that what appears to be chaos and instability in government may well be a systemic design of the madness that ills our governmental environment – a chaotic design. A careful analysis makes the case for the following observable trends of inappropriate control of State systems through a power-elite that is pivoted around the President of the Republic that is systematically siphoning the assets of the State. They do this by:

1. Securing control over state wealth, through the capture of state-owned companies by chronically weakening their governance and operational structures.

2. Securing control over the public service by weeding out skilled professionals.

3. Securing access to rent-seeking opportunities by shaking down regulations to their advantage, and to the disadvantage of South Africans.

4. Securing control over the country’s fiscal sovereignty.

5. Securing control over strategic procurement opportunities by intentionally weakening key technical institutions and formal executive processes.

6. Securing a loyal intelligence and security apparatus. 

7. Securing parallel governance and decision-making structures that undermine the executive. 

What we see persuades us that the present government has lost moral legitimacy. The question that this has raised is in the constitutional dimension. Does the conduct of the government render it to have violated its constitutional mandate? That is a matter for the lawyers to explore further

We urge the African National Congress as the governing party to examine itself and mend the ways of government before we reach the point of no return – for this has implications for the ANC in government, for its leadership and members. We appeal to the civil servants in government, to note and remember that whereas governments come and go with elections, they as civil servants are part of the permanent State system of the citizenry, and the instrumentation of the public good envisioned in our constitutional dispensation.

The Parliamentary Committee on Public Enterprises

The members of the Parliamentary Portfolio Committee on Public Enterprises unanimously called a meeting on an urgent basis, in an attempt to obtain clarity on recent events at Eskom, especially regarding the re-appointment of its CEO, Brian Molefe, and specifically whether he “retired, was retrenched, resigned or did he step down” (as the Committee’s Chairperson put it). During the Committee’s proceedings on 23 May 2017, questions and comments were put to the Minister of Public Enterprises and the Chairman of the Board of Eskom, mainly on the question of the status and nature of Brian Molefe’s employment contract.

The former Minister of Finance, Pravin Gordhan, now an MP and member of this Committee, put it as follows: 

The public is connecting the dots… The public is increasingly aware that you are abusing state property and state resources in the name of yourselves and not in the name of the South African public, that you are part of, wittingly or unwittingly (and in some cases there is enough evidence to say wittingly), a conspiracy to capture Eskom for the benefit of the few. That’s the reality, let’s not play around with technical questions… 

What the South African public is worried about is that we are reaching a stage in managing governance in South African where there are a significant number of people in the bureaucracy and elsewhere, and on the boards, that are taking the view that ‘I don’t care, I don’t care if you know what I do, I don’t care if you know that public resources are going elsewhere, I don’t care how many reports the Public Protector or anybody else provides, because I am protected.’

The Chairperson stated at the end of the hearing that the Committee is concerned at the state of governance in Eskom and views the reappointment of Brian Molefe as illegal. It is interesting to note that the Minister and Eskom’s Chairperson received no support whatever from any of the ANC MPs who are on the Committee.  

Study by the State Capacity Research Project

The State Capacity Research Project published its study entitled Betrayal of the Promise: How South Africa is being Stolen on 25 May 2017. This has been widely reported on in the media. The State Capacity Research project describes itself as an interdisciplinary, inter-university research partnership that aims to contribute to the public debate about ‘state capture’ in South Africa.

The study makes the following findings: 

Until recently, the decomposition of South African state institutions has been blamed on corruption, but we must now recognise that the problem goes well beyond this. Corruption normally refers to a condition where public officials pursue private ends using public means. While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup and must, therefore, be understood as a political project that is given a cover of legitimacy by the vision of radical economic transformation.

The March 2017 Cabinet reshuffle was confirmation of this silent coup; it was the first Cabinet reshuffle that took place without the full prior support of the governing party. This moves the symbiotic relationship between the constitutional state and the shadow state that emerged after the African National Conference (ANC) Polokwane conference in 2007 into a new phase. The reappointment of Brian Molefe as Eskom’s chief executive officer (CEO) a few weeks later in defiance of the ANC confirms this trend”

This raises the question about whether there is, in fact, a strategic centre of sorts. In general, the answer is no. Nor is there one single powerful network that overrides all others. The clearest and most disturbing indicator that the South African rent-seeking system tends towards the chaotic end of the spectrum is the collapse of the cabinet system as the core of the executive branch of the state.

There is evidence that Zuma tends to govern via a set of ‘kitchen cabinets’ comprising selected groups from different networks. Kitchen cabinets are small informal reference groups that are convened on an as-needed basis. They can also be shell structures that are activated when needed. As will be demonstrated, they have been known to be drawn from the state security establishment, Gupta networks, SOE sector, sub-groups of cabinet ministers and deputy ministers, family networks, international networks (e.g., Angola, Russian intelligence), key black business groups, the ANC (in particular the Premier League and Magashule), and selected loyalists in the public service (usually loyal director generals).

The evolution in recent decades of rent management systems within neo-patrimonial regimes around the world has taken many forms. In summary, though, they can be characterised within a spectrum that ranges from centralised/coordinated to chaotic. The South African rent-seeking system is a kind of hybrid, partly because of Zuma’s personally vulnerable position due to outstanding and unresolved charges against him, the Constitutional Court finding on Nkandla and his embeddedness within a well-structured constitutional order.

He aspires to be like Putin or Angola’s Dos Santos, but is entangled by constitutional state requirements he cannot dispense with (like reporting to Parliament and subordination – at least for now – to the Constitutional Court) and competitive dynamics within the shadow state that the Gupta networks do not always control (witness the PRASA debacle).

The report also highlights the effect of this perverted management system on the poorest sections of society:  

The politicisation of procurement as a means to achieve radical economic transformation frequently results in the subversion of service delivery mandates. Therefore, in recent years there have been purges of professional public servants and the repurposing of administrations away from their constitutional and legislative mandates. It has also opened departments and especially SOEs to massive competition and rivalry, not so much about policy, but about who gets what tenders. This weakens and often breaks administrations, which are then unable to deliver services.

A vacuum is created that can be filled by transactions that occur within the shadow state. This is especially devastating for working families and for the poor, who are more dependent on government services than the middle class and the rich. Failures in health and education, for example, reproduce historical, racialised patterns of inequality. It distracts attention from the economy itself and the inclusive structural transformation that is needed to make the economy more productive and labour-absorptive.

Comment

These events demonstrate that the intensity of the public debate on corruption and state capture has been ratcheted up a couple of levels. In this process, certain aspects which were not a regular part of the public debate have now come to the fore and the manner in which they are expressed, show that they are accepted as fact and not mere conjecture:

- the connection is increasingly being made between certain events and the acts of representatives of Government and state-owned enterprises, i.e. the dots are being connected, showing systemic corruption; 

- that chaos and incompetence have become part and parcel of the whole system. It is therefore not corruption on its own that needs to be confronted, but the fact that a corrupt system has been facilitated by the removal of adequately experienced professionals/bureaucrats from Government and state-owned enterprises; and

- the concept of a “mafia state’’ is now firmly entrenched as part of the public debate. The Deputy President, Cyril Ramaphosa, has also referred to this threat in his speeches immediately after the SACC report was made public.

The reports by the SACC and the State Capacity Research Project and the proceedings at the Parliamentary Committee on Public Enterprises, have provided important additions to the public understanding of how major functions of Government and state-owned enterprises have been subverted for the benefit of a select few. The reports rely on information which is already in the public domain and therefore do not provide much new evidence, but they do make a valuable contribution in helping the public to make sense of the damaging and pervasive effects of state capture and corruption.

Unravelling is well under way, and more of it can be expected in the coming months.

Anton van Dalsen is Legal Counsellor, Helen Suzman Foundation.

This article first appeared as an HSF Brief.